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APEC Leadership in Heightening Ethical Standards 1 Why APEC launched the “Business Ethics for APEC SMEs Initiative” Dato’ Hafsah Hashim Chief Executive Officer of SME Corporation, Malaysia Co-Chair of the Expert Working Group to Draft The Kuala Lumpur Principles Why APEC focused on SMEs and Business Ethics Small & Medium Enterprises (SMEs) are the engine of economic growth and will continue to serve as a key driver in the APEC region’s economic expansion as long as they are able to operate, trade, and innovate in ethical business environments. As a result, the Business Ethics for APEC SMEs initiative was launched under the APEC SME Working Group in 2010. The initiative was co-sponsored by 16 APEC economies (Australia, Brunei Darussalam, Canada, Hong Kong China, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Peru, The Philippines, Singapore, Chinese Taipei, Thailand, and Vietnam), and strongly supported by the APEC Business Advisory Council (ABAC). 3 Why APEC focused on SMEs and Business Ethics Unethical behavior hurts economies Negative impacts on inflation Decreased GDP Currency depreciation Reduced foreign investment Undermined health systems Inferior and unsafe Infrastructure Source: Presentation by Dr. Philip Nichols (Professor of Legal Studies and Business Ethics at the Wharton School of Business) at the APEC Business Ethics for APEC SMEs Workshop in Gifu, Japan – September 2010. Unethical behavior hurts individual businesses Increases the costs of doing business (through bribes and penalties) Lowers sales growth and productivity Lowers the ability to enter new markets Constricts access to capital Over the long term undermines a company’s financial growth As the Government of Mexico explained at the May 2011 APEC SME Ministerial in Big Sky, Montana (USA), countries with higher perceived corruption tend to have lower real per capita GDP. Source: World Bank. Unethical business environments disproportionately impact SMEs. More than 70% of SMEs in transition economies perceive corruption as an impediment to their business. One-third of SMEs in transition economies perceive corruption as a major business obstacle. Source: The Business Environment and Enterprise Performance Survey (BEEPS) - a joint initiative of the European Bank for Reconstruction and Development (EBRD) and the World Bank. And more than US$1 trillion dollars are paid in bribes every year, meaning the cost of corruption is equal to a full THREE PERCENT of world GDP. Source: World Bank Institute. 5 Why APEC developed voluntary codes of ethics Benefits APEC member economies Provides a platform for effective industry self-regulation Supports government enforcement and anti-corruption efforts Benefits businesses, especially resource-constrained SMEs Provides companies with clarity and harmonization in rules and practices Allows companies to compete across the region at a reduced cost In the case of the biopharmaceutical and medical device sectors, facilitates ongoing innovation Benefits patients Fuels advances and promote access to life-saving medicines Ensures that decisions are made in the best interest of patients Facilitates safe and effective use by ensuring appropriate training 6 The KL Principles for Voluntary Codes of Business Ethics in the Medical Device Sector Recognizes that appropriate and ethical interactions help ensure that medical decisions are made in the best interests of patients Assists entire medical device sector and eco-system to align standards for ethical interactions: Companies and industry associations Healthcare professional organizations Industry regulators and/or anti-corruption enforcement authorities 7 The Mexico City Principles for Voluntary Codes of Business Ethics in the Biopharmaceutical Sector Recognizes that appropriate and ethical interactions help ensure that medical decisions are made in the best interests of patients Assists entire biopharmaceutical sector 1 and eco-system to align standards for ethical interactions: Companies and industry associations Healthcare professional organizations Industry regulators and/or anti-corruption enforcement authorities 1 For purposes of The Mexico City Principles the term “biopharmaceutical sector” includes companies, regardless of ownership status, that develop, manufacture, market, or distribute pharmaceutical and/or biolog ic products. 8